Jefferies downgrades JPMorgan, U.S. Bancorp to 'hold'

Jefferies analyst Ken Usdin downgraded JPMorgan Chase & Co. and U.S. Bancorp to "hold" from "buy" as the analyst sees the companies as having fewer "meaningful EPS upside drivers."

In Usdin's view, JPMorgan has limited upside in light of a "still-premium multiple after the cost-related EPS reset," as well as tough fee comparisons. The analyst also noted in a Feb. 13 research report that while the company is well-positioned for core net interest income growth, trading-related net interest income will fade with higher rates.

With regard to U.S. Bancorp, Usdin wrote that the company's net interest income trajectory will benefit relatively less than many peers as rates increase, due to a heavier mix of fixed-rate consumer loans and a deposit base that tends to have a higher beta than most peers. In addition, the analyst noted the public meeting on the company's proposed acquisition of MUFG Union Bank NA might lead to a longer period of time to complete the deal, which could change the anticipated trajectory of cost saves and return to buyback activity.

Usdin lowered the price target for JPMorgan to $155 from $180, while the price target for U.S. Bancorp was reduced to $64 from $66. JPMorgan's EPS estimate was raised to $10.50 from $9.75 for 2022 and to $11.45 from $10.60 for 2023. U.S. Bancorp's EPS estimate was increased to $4.50 from $4.25 for 2022 and to $5.30 from $4.85 for 2023.

Additionally, Usdin upgraded Comerica Inc. and Zions Bancorp. NA to "buy" from "hold," seeing these companies as the "top beneficiaries" of rising rates, commercial and industrial loan growth, excess liquidity and fewer fee headwinds.

In the analyst's view, consensus has not adequately reflected the companies' potential net interest income growth and incremental upside if the Federal Reserve moves faster in terms of rate hikes than is currently reflected in his models and the forward curve. Usdin also noted that, similar to Comerica, Zions will not undergo the annual Fed stress tests and is less governed by the potential volatility that the Dodd-Frank Act stress test process can induce for required capital ratio minimums.

The analyst raised the price target for Comerica to $114 from $98 and adjusted the 2022 EPS estimate for the company to $6.35 from $5.35 and the 2023 EPS estimate to $7.85 from $6.30. The price target for Zions was increased to $87 from $70 and its 2022 EPS estimate was revised to $5.40 from $4.85, while its 2023 EPS estimate was revised to $6.45 from $5.60.